Fine Line Service began operations on January 28, 2008. The company does not establish an allowance for doubtful accounts. It simply recognizes a bad debt expense when an account is deemed uncollectible. The company has written off the following items over the past five years:

July 6, 2008Wrote off $10,000 as uncollectible from a sale made on March 1, 2008

Feb. 3, 2009Wrote off $50,000 as uncollectible from a sale made on October 28, 2008.

Mar. 11, 2010Wrote off $25,000 as uncollectible from a sale made on December 20, 2008 ($12,000) and a sale made on May 10, 2008 ($13,000).

Mar. 24, 2010Recovered $5,000 that had been written off on February 3, 2009. It is company policy to credit bat debt expense when an account is recovered.

Aug. 8, 2011Wrote off $75,000 as uncollectible from sales made in 2008 ($20,000), in 2009 ($25,000), and in 2010 ($30,000).

Dec. 2, 2011Wrote off $5, 000 as uncollectible from a sale made on April 26, 2011.

Sept. 19, 2012Wrote off $90,000 as uncollectible from sales in 2008 ($5,000), in 2009 ($30,000), in 2010 ($25,000), in 2011 ($20,000), and in 2012 ($10,000).

Over the period 2008 to 2012, Fine Linen Service realized the following sales and reported the following ending balances in accounts receivable.

At the beginning of operations, a consultant had informed Fine Linen Service that the company should expect not to collect 8 percent of total sales.REQUIRED:a. List the bad debt expense and the balance sheet value of accounts receivable for each year over the five-year period under both Fine Linen's current method and the allowance method. Use the following format:

b. Compute the total bad debt expense over the five-year period under the two methods. Why is the allowance method preferred to Fine Linen's currentmethod?

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Sales Accounts Receivable S 950,000 900,000 1,200,000 1,175,000 1,095,000 2008 2009 2010 2011 S1,000,000 975,000 1,025,000 1,032,000 990,000 2012